1st mortgage payment

sm364

We have been advised our mortgage (from Nationwide) has been approved and we are waiting to view the document. However, we have been advised that the first mortgage payment may be higher than expected unless we exchange/complete at a "good time of the month". So, if we want our mortgage payment to be taken from our bank account on the 25th January and we exchange on 7th January and complete on 14th January - would our first mortgage payment be 25th January and would this incur the higher first payment charge?

Many thanks for any advice received.

TrickyDicky101

This comes about because mortgage repayments are generally made on an "Repayments in advance" basis which means you take out the mortgage on Day 1 and your first repayment back to the bank is also due on Day 1 (the alternative of repayments in arrears would mean first repayment due one month after you take the mortgage out).

The additional interest arises because if you take the mortgage on 14th January then your first repayment on 25th January will include additional interest from 14th to the 25th to reflect the fact you have not made your first repayment until the 25th (rather than on the 14th). If you want to minimise the impact of the additional interest then you need a monthly repayment date as soon after your completion date as possible.

LilacPixie

As the PP said interest. We move this friday and our 1st payment is due 'on or around' 1st Jan 11 and its just over 1k instead of £700

KarenBB

sm364 wrote: »

We have been advised our mortgage (from Nationwide) has been approved and we are waiting to view the document. However, we have been advised that the first mortgage payment may be higher than expected unless we exchange/complete at a "good time of the month". So, if we want our mortgage payment to be taken from our bank account on the 25th January and we exchange on 7th January and complete on 14th January - would our first mortgage payment be 25th January and would this incur the higher first payment charge?

Many thanks for any advice received.

I'm sure if you complete on 7th January your 1st mortgage payment wouldn't be until 25th February. You'd pay a full months mortgage payment for Feb (1st to end of month) plus interest for month of completion 7th Jan to end of month so it would approx 1 month plus 3 and a bit weeks interest. To get your 1st mortgage payment as small as possible a "good time of the month" would be in the last few days of the month, so you'd pay Feb plus just a few days interest.

From N'wides website
Your first payment

When working out your first payment we calculate the interest on a daily basis from the day we release the funds and this is added to the following months' mortgage payment.
The first payment is generally taken the month after completion near or on the date specified on your direct debit form. For example; if you complete on 25 March, the first payment will be debited from your bank account in April, on or near the date you specified on your direct debit form. The payment will include interest incurred from 25 - 31 March and your revised monthly mortgage payment.

BadgerFace_2

Think of it like rent.

If you moved into a house in the middle of the month, but wanted to pay your rent on the 1st...they wouldn't say 'no bother, have those 2 weeks for free'. You're just paying the difference and your normal payment.

getmore4less

The best time for a mortgage payment is just after you normaly get paid but not too close.

The best way to manage the first payment is to keep and extra payment back as a buffer, once the mortgage is set up and running(month 2) you overpay this buffer upto any ERC limits.

The buffer needs to be up to a months interest but a extra full payment is the easy way to make sure you have enough.

TrickyDicky101

KarenBB wrote: »

I'm sure if you complete on 7th January your 1st mortgage payment wouldn't be until 25th February. You'd pay a full months mortgage payment for Feb (1st to end of month) plus interest for month of completion 7th Jan to end of month so it would approx 1 month plus 3 and a bit weeks interest. To get your 1st mortgage payment as small as possible a "good time of the month" would be in the last few days of the month, so you'd pay Feb plus just a few days interest.

This is incorrect - assuming the first month's payment was not until 25th February, then two repayment dates would be included (25th Jan and 25th Feb) in which case the payment on 25th Feb would be twice the normal monthly repayment plus the interest from 14th to 25th (note that this is not at odds with the advice given on Nationwide's site that you quoted).

shimano

Sync your completion date to a day or 2 after your payment date to minimise the effect. We done so and our first payment is more or less the same as the normal payment.

TrickyDicky101

shimano wrote: »

Sync your completion date to a day or 2 after your payment date to minimise the effect. We done so and our first payment is more or less the same as the normal payment.

Whether this will work or not depends on whether your mortgage offer is quoted on a repayments in advance basis (in which case you make the problem worse, not better) or repayments in arrears (in which case it will do as you suggest).

KarenBB

TrickyDicky101 wrote: »

This is incorrect - assuming the first month's payment was not until 25th February, then two repayment dates would be included (25th Jan and 25th Feb) in which case the payment on 25th Feb would be twice the normal monthly repayment plus the interest from 14th to 25th (note that this is not at odds with the advice given on Nationwide's site that you quoted).

Sorry Tricky but in this case you are wrong and I'm right.

At Nationwide the mortgage falls due on the 1st of the month but you can choose what date you make the mortgage payment. The mortgage payment collected on the 25th of the month does not cover 25 Feb to 24 March, it is hor 1st Feb to 28th Feb. If sm364 has the funds advanced on the 7th it WILL be normal payment for Feb plus interest for 7th Jan to 31st Jan. I've had s mortgages with Nationiwde and that is how it's been worked on all of them. I've had funds relased on various dates of the month with the monthly dd always set for the 28th, I've never had to pay over 2 months on the first mortgage payemt. If sm364 contacts Nationwide I'm sure they'll confirm the information I've given is correct.

For the 1st payment to be as small as possible the funds have to be advanced as close as possible to the end of the month.

Yorkie1

I agree with KarenBB's interpretation of NW mortgage charging - it's how mine works too.